T-Mobile settles for $90M in “cramming” case

Attorney General Lisa Madigan Friday joined with her counterparts around the country, the Federal Trade Commission and the Federal Communications Commission to announce a $90 million settlement with T-Mobile USA over allegations the company placed unauthorized charges on customers’ accounts, a practice known as “cramming.”

Madigan, the other attorneys general, the FTC and the FCC reached the settlement following reports of cramming from T-Mobile cellphone customers who were billed for services by third-party companies that they never authorized or wanted, such as “premium” text message subscription services (PSMS) that sent customers horoscopes, trivia and sports updates for $9.99 a month.

T-Mobile is the second mobile telephone provider to enter into a nationwide settlement to resolve allegations regarding cramming. In October, the attorneys general, FTC and FCC reached a similar $105 million settlement with AT&T Mobility.

“Cell phone bill cramming has become a major source of consumer fraud,” Madigan said. “We will continue to take action to stop scammers from illegally profiting from putting unauthorized charges on our bills. This settlement ensures that all third-party charges are first authorized by T-Mobile customers.”

Cramming happens when third-party vendors use consumers’ phone numbers much like a credit card. Vendors add charges to phone bills for bogus products or services, such as celebrity gossip items, horoscopes, trivia and joke-of-the-day offerings, that consumers and businesses never requested or authorized. But because consumers rarely, if ever, detect the fraudulent charges, the scammers often illegally profit for months at a time.

Under the terms of the settlements, T-Mobile must provide each victim of cramming who files a claim under its Premium SMS Refund Program an opportunity for a full refund. Consumers can submit claims under the program by visiting http://www.t-mobilerefund.com. They can also find information about refund eligibility and how to obtain a refund, and request a free account summary that details PSMS purchases on their accounts at that site. For additional questions, contact the Refund Administrator at (855) 382-6403.

The settlement bans T-Mobile from the commercial PSMS business. T-Mobile must also take a number of steps designed to ensure that it only bills consumers for third-party charges that have been authorized, including the following:

T-Mobile must obtain consumers’ express consent before billing consumers for third-party charges, and must ensure that consumers are only charged for services if the consumer has been informed of all material terms and conditions of their payment;

T-Mobile must give consumers an opportunity to obtain a full refund or credit when they are billed for unauthorized third-party charges;

T-Mobile must inform its customers when they sign up for services that their mobile phone can be used to pay for third-party charges, and must inform consumers of how those third-party charges can be blocked if the consumer doesn’t want to use their phone as a payment method for third-party products; and

T-Mobile must present third-party charges in a dedicated section of consumers’ mobile phone bills, must clearly distinguish them from T-Mobile charges, and must include in that same section information about the consumers’ ability to block third-party charges.

In 2012, Madigan drafted and negotiated a law that banned unauthorized charges on landline phones, making Illinois only the second state in the nation to ban the practice on wired phone lines. But as more people now use cellphones as their primary phones, scam artists are migrating to wireless billing schemes, spurring the need for stronger consumer protections.

In total, the Attorney General’s office has filed 30 lawsuits against crammers. Among the most glaring of the targets for these scams was by US Credit Find Inc., a Venice, Calif.-based operation, which crammed a Springfield public library’s dial-a-story telephone line. Madigan sued US Credit Find Inc. in 2009.

Over the last several years, Attorney General Madigan has advocated for a nationwide ban on phone bill cramming, testifying before the U.S. Senate Commerce Committee and filing comments with the Federal Communications Commission.